EU27 squash UK hopes of bespoke trade deal

European diplomats are maneuvering to squash London's hopes of a special cherry-picked economic deal with the EU post Brexit.

Even before Brexit negotiations move to phase two on trade and Britain's future relationship with the bloc, the EU27 are coalescing around an offer to London of a free-trade agreement not much different from the one struck with Canada.

The EU's Brexit negotiator Michel Barnier has backed such a deal for the U.K. post Brexit, concluding that since Prime Minister Theresa May has rejected continued membership of the EU single market and customs union, a basic Canada-style deal is the only realistic option.

EU ambassadors met Wednesday afternoon to begin hammering out the EU27's position on future trade talks once phase two of the Brexit negotiations begins. According to two senior diplomats in the room, they agreed with Barnier that a free-trade agreement is the only option compatible with both the EU's rules and the U.K.'s position.

“Canada could be one possible model,” said a senior diplomat who attended the Coreper meeting in Brussels.

The Brexit talks are currently deadlocked, having made little headway since the European Council summit in October.

An EU official who has been closely involved in the bloc's internal preparations for trade talks with the U.K. said: "We went through the guidelines and we squared them with British red lines, and if you do that you see that we are in the territory of a free-trade agreement ... where Canada is a model, but also Japan, or Korea. We don't have an FTA that is a template for all.”

This bolstering of Barnier's analysis will be bad news for London. The British government says it wants to pursue a "deep and special partnership" with the EU that includes much closer trade ties than a standard free-trade agreement — particularly on the services that make up 79 percent of the U.K. economy. At the same time, it will not accept free movement of people as would be required under a Norway-style arrangement.

British Prime Minister Theresa May said in her Florence speech in September that a Norway-style deal would represent “a loss of democratic control” because the U.K. would have no representation in the EU institutions, while a Canada-style deal would be “a restriction on our market access.”

One crumb of comfort from the meeting for the U.K. is that EU ambassadors are not proposing a rigid template for a deal, implying some flexibility. “[There was] a common understanding that a framework of future EU-UK relations, after, and if, the withdrawal agreement is reached, will most likely be a tailor-made arrangement,” said the senior diplomat. “I don't expect that EU would offer something specific.”

Another senior diplomat said that during the meeting “member states said they don't want to just indicate one model, in a rigid way.”

There was no discussion Wednesday of when a future round of Brexit talks might take place.

The Brexit talks are currently deadlocked, having made little headway since the European Council summit in October at which EU leader decided that sufficient progress had not been made to move to the next phase. May is due to meet European Council President Donald Tusk in Brussels Friday on the sidelines of a summit on the EU's Eastern border. It is thought that she will test the reception of an enhanced financial offer from the U.K.

At the meeting of ambassadors Wednesday, there was no discussion of when a future round of Brexit talks might take place, people present at the meeting said. EU officials stress that in order to fix a date they want first to be sure that London will be ready to move on the financial settlement, rather than another “stock-taking exercise.”

“The problem is that [British Prime Minister Theresa] May wants to move at the very last moment, as Barnier is urging her to speed up,” another diplomat added.

But she suggested that the two-week deadline set by Barnier at the last round of talks — which ends on Friday — is flexible. “If there’s real progress on the financial offer, the Council is ready to table draft guidelines for the second phase on 6 December,” she said.